Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. Nos. L-21000, 21002-21004, and

21006 December 20, 1924

In the matter of the involuntary insolvency of Umberto

de Poli. BANK OF THE PHILIPPINE ISLANDS, ET
AL.,claimants-appellees,
vs.
J.R. HERRIDGE, assignee of the insolvent estate of U.
de Poli, BOWRING and CO., C.T. BOWRING and CO.,
LTD., and T.R. YANGCO, creditors-appellants.

Crossfield and O'Brien, J.A. Wolfson and Camus and

Delgado for appellants.
Hartigan and Welch, Fisher and DeWitt and Gibbs and
McDonough for appellees.

OSTRAND, J.:

The present appeals, all of which relate to the Insolvency

of U. de Poli, have been argued together and as the
principal questions involved are the same in all of them,
the cases will be disposed of in one decision.

The insolvent Umberto de Poli was for several years

engaged on an extensive scale in the exportation of Manila
hemp, maguey and other products of the country. He was
also a licensed public warehouseman, though most of the
goods stored in his warehouses appear to have been
merchandise purchased by him for exportation and
deposited there by he himself.
In order to finance his commercial operations De Poli
established credits with some of the leading banking
institutions doing business in Manila at that time, among
them the Hongkong & Shanghai Banking Corporation, the
Bank of the Philippine Islands, the Asia Banking
Corporation, the Chartered Bank of India, Australia and
China, and the American Foreign Banking Corporation.
The methods by which he carried on his business with the
various banks was practically the same in each case and
does not appear to have differed from the ordinary and well
known commercial practice in handling export business by
merchants requiring bank credits.

De Poli opened a current account credit with the bank

against which he drew his checks in payment of the
products bought by him for exportation. Upon the purchase,
the products were stored in one of his warehouses and
warehouse receipts issued therefor which were endorsed
by him to the bank as security for the payment of his credit
in the account current. When the goods stored by the
warehouse receipts were sold and shipped, the warehouse
receipt was exchanged for shipping papers, a draft was
drawn in favor of the bank and against the foreign
purchaser, with bill of landing attached, and the entire
proceeds of the export sale were received by the bank and
credited to the current account of De Poli.itc-a1f

On December 8, 1920, De Poli was declared insolvent by

the Court of First Instance of Manila with liabilities to the
amount of several million pesos over and above his assets.
An assignee was elected by the creditors and the election
was confirmed by the court on December 24, 1920. The
assignee qualified on January 4, 1921, and on the same
date the clerk of the court assigned and delivered to him
the property of the estate.

Among the property taken over the assignee was the

merchandise stored in the various warehouses of the
insolvent. This merchandise consisted principally of hemp,
maguey and tobacco. The various banks holding
warehouse receipts issued by De Poli claim ownership of
this merchandise under their respective receipts, whereas
the other creditors of the insolvent maintain that the
warehouse receipts are not negotiable, that their
endorsement to the present holders conveyed no title to
the property, that they cannot be regarded as pledges of
the merchandise inasmuch as they are not public
documents and the possession of the merchandise was
not delivered to the claimants and that the claims of the
holders of the receipts have no preference over those of
the ordinary unsecured creditors.

On July 20, 1921, the banks above-mentioned and who

claim preference under the warehouse receipts held by
them, entered into the following stipulation:lawphi1.net

It is stipulated by the between the undersigned counsel, for

the Chartered Bank of India, Australia & China, the
Hongkong & Shanghai Banking Corporation, the Asia
Banking Corporation and the Bank of Philippine Islands
that:

Whereas, the parties hereto are preferred creditors of the

insolvent debtor U. de Poli, as evidenced by the following
quedans or warehouse receipts for hemp and maguey
stored in the warehouses of said debtor:

QUEDANS OR WAREHOUSE RECEIPTS OF THE

CHARTERED BANK

No. A-131 for 3,808 bales hemp.

No. A-157 for 250 bales hemp.
No. A-132 for 1,878 bales maguey.
No. A-133 for 1,574 bales maguey. Nos. 131, 132 and 133
all bear date November 6, 1920, and No. 157, November
19, 1920.
QUEDANS OR WAREHOUSE RECEIPTS OF THE
HONGKONG & SHANGHAI BANKING CORPORATION

No. 130 for 490 bales hemp and 321 bales maguey.
No. 134 for 1,970 bales hemp.
No. 135 for 1,173 bales hemp.
No. 137 for 237 bales hemp.

QUEDANS OR WAREHOUSE RECEIPTS OF THE ASIA

BANKING CORPORATION

No. 57 issued May 22, 1920, 360 bales hemp.

No. 93 issued July 8, 1920 bales hemp.
No. 103 issued August 18, 1920, 544 bales hemp.
No. 112 issued September 15, 1920, 250 bales hemp.
No. 111 issued September 15, 1920, 2,007 bales maguey.

QUEDANS OR WAREHOUSE RECEIPTS OF THE BANK

OF THE PHILIPPINE ISLANDS

No. 147 issued November 13, 1920, 393 bales hemp.

No. 148 issued November 13, 1920, 241 bales hemp.
No. 149 issued November 13, 1920, 116 bales hemp.
No. 150 issued November 13, 1920, 217 bales hemp.

And whereas much of the hemp and maguey covered by

the above mentioned quedans was either non-existent at
the time of the issuance of said quedans or has since been
disposed of by the debtor and of what remains much of the
same hemp and maguey transferred by means of quedans
to one of the parties hereto has also been transferred by
means of other quedans to one or more of the other parties
hereto and

Whereas, the hemp and maguey covered by said quedans

is to a considerable extent commingled.

Now, therefore, it is hereby agreed subject to the rights of

any other claimants hereto and to the approval of this
Honorable Court that all that remains of the hemp and
maguey covered by the warehouse receipts of the parties
hereto or of any of them shall be adjudicated to them
proportionately by grades in accordance with the quedans
held by each as above set forth in accordance with the rule
laid down in section 23 of the Warehouse Receipts Law for
the disposition of commingled fungible goods.

Manila, P.I., July 20, 1921.

GIBBS, MCDONOUGH & JOHNSON

By A. D. GIBBS
Attorneys for the Chartered Bank
of India, Australia & China

FISHER & DEWITT

By C.A. DEWITT
Attorneys for the Hongkong & Shanghai
Banking Corporation

WOLFSON, WOLFSON & SCHWARZKOFF

Attorneys for the Asia Banking Corporation

HARTIGAN & WELCH

Attorneys for the Bank of the Philippine Islands

Claims for hemp and maguey covered by the respective

warehouse receipts of the banks mentioned in the
foregoing stipulation were presented by each of said banks.
Shortly after the adjudication of the insolvency of the firm
of Wise & Co., one of the unsecured creditors of the
insolvent on June 25, 1921, presented specific written
objections to the claims of the banks on the ground of the
insufficiency of the warehouse receipts and also to the
stipulation above quoted on the ground that it was entered
into for the purpose of avoiding the necessity of identifying
the property covered by each warehouse receipt. Bowring
& Co., C.T. Bowring Co., Ltd., and Teodoro R. Yangco,
also unsecured creditors of the insolvent, appeared in the
case after the decision of the trial court was rendered and
joined with the assignee in his motion for a rehearing and
in his appeal to this court.

Upon hearing, the court below held that the receipts in

question were valid negotiable warehouse receipts and
ordered the distribution of the hemp and maguey covered
by the receipts among the holders thereof proportionately
by grades, in accordance with the stipulation above quoted,
and in a supplementary decision dated November 2, 1921,
the court adjudged the merchandise covered by
warehouse receipts Nos. A-153 and A-155 to the Asia
Banking Corporation. From these decisions the assignee
of the insolvent estate, Bowring & Co., C.T. Bowring Co.,
Ltd., and Teodoro R. Yangco appealed to this court.

The warehouse receipts are identical in form with the

receipt involved in the case of Roman vs. Asia Banking
Corporation (46 Phil., 705), and there held to be a valid
negotiable warehouse receipt which, by endorsement,
passed the title to the merchandise described therein to
the Asia Banking Corporation. That decision is, however,
vigorously attacked by the appellants, counsel asserting,
among other things, that "there was not a single
expression in that receipt, or in any of those now in
question, from which the court could or can say that the
parties intended to make them negotiable receipts. In fact,
this is admitted in the decision by the statement "... and it
contains no other direct statement showing whether the
goods received are to be delivered to the bearer, to a
specified person, or to a specified person or his order."
There is nothing whatever in these receipts from which the
court can possibly say that the parties intended to use the
phrase "a la orden" instead of the phrase "por orden," and
thus to make said receipts negotiable. On the contrary, it is
very clear from the circumstances under which they were
issued, that they did not intend to do so. If there was other
language in said receipts, such as would show their
intention in some way to make said receipts negotiable,
then there would be some reason for the construction
given by the court. In the absence of language showing
such intention, the court, by substituting the phrase "a la
orden" for the phrase "por orden," is clearly making a new
contract between the parties which, as shown by the
language used by them, they never intended to enter into."

These very positive assertions have, as far as we can see,

no foundation in fact and rest mostly on misconceptions.

Section 2 of the Warehouse Receipts Act (No. 2137)

prescribes the essential terms of such receipts and reads
as follows:

Warehouse receipts needed not be in any particular form,

but every such receipt must embody within its written or
printed terms

(a) The location of the warehouse where the goods are

stored,

(b) The date of issue of the receipt,

(c) The consecutive number of the receipt,

(d) A statement whether the goods received will be

delivered to the bearer, to a specified person, or to a
specified person or his order,

(e) The rate of storage charges,

(f) A description of the goods or of the packages containing

them,

(g) The signature of the warehouseman, which may be

made by his authorized agent,
(h) If the receipt is issued for goods of which the
warehouseman is owner, either solely or jointly or in
common with others, the fact of such ownership, and

(i) A statement of the amount of advances made and of

liabilities incurred for which the warehouseman claims a
lien. If the precise amount of such advances made or of
such liabilities incurred is, at the time of the issue of the
receipt, unknown to the warehouseman or to his agent who
issues it, a statement of the fact that advances have been
made or liabilities incurred and the purpose thereof is
sufficient.

A warehouseman shall be liable to any person injured

thereby, for all damage caused by the omission from a
negotiable receipt of any of the terms herein required.

Section 7 of the Act reads:

A nonnegotiable receipt shall have plainly placed upon its

face by the warehouseman issuing it "nonnegotiable," or
"not negotiable." In case of the warehouseman's failure so
to do, a holder of the receipt who purchased it for value
supposing it to be negotiable, may, at his option, treat such
receipt as imposing upon the warehouseman the same
liabilities he would have incurred had the receipt been
negotiable.

All of the receipts here in question are made out on printed

blanks and are identical in form and terms. As an example,
we may take receipt No. A-112, which reads as follows:

U. DE POLI
209 Estero de Binondo

BODEGAS
QUEDAN No. A-112
Almacen Yangco

Por

"Quedan depositados en
estos almacenes por orden
del Sr. U. de Poli la cantidad
de doscientos cincuenta
fardos abaca segun marcas
detalladas al margen, y con
arreglo a las condiciones
siguientes:
Clase de 1.a Estan asegurados contra
las riesgo de incendios
Marcas Bultos
mercancias exclusivamente, segun las
UDP 250
Fardos condiciones de mis polizas;
abaca quedando los demas por
cuenta de los depositantes.

2.a No se responde del peso,

clase ni mal estado de la
mercancia depositada.

3.a El almacenaje sera de

quince centimos fardo por
mes.
4.a El seguro sera de un
I certify that I am the sole octavo por ciento mensual
owner of the merchandise por el total. Tanto el
herein described. almacenaje como el seguro
(Sgd.) "UMBERTO DE se cobraran por meses
POLI vencidos, y con arreglo a los
dias devengados siendo el
 minimo para los efectos del
cobro 10 dias.

5.a No seran entregados

dichos efectos ni parte de los
mismos sin la presentacion
de este "quedan" para su
correspondiente deduccion.

6.a El valor para el seguro de

estas mercancias es
de pesos filipinos nueve mil
quinientos solamentes.

7.a Las operaciones

de entrada y salida, seran de
cuenta de los depositantes,
pudiendo hacerlos con sus
trabajadores, o pagando los
que le sean facilitados, con
arreglo a los tipos que tengo
convenido con los mios.
Valor del Seguro P9,500. Manila, 15 de sept. de 1920.
V. B. El Encargado,
(Sgd.) UMBERTO DE POLI (Sgd.) I. MAGPANTAY

The receipt is not marked "nonnegotiable" or "not

negotiable," and is endorsed "Umberto de Poli."

As will be seen, the receipt is styled "Quedan" (warehouse

receipt) and contains all the requisites of a warehouse
receipt as prescribed by section 2, supra, except that it
does not, in express terms, state whether the goods
received are to be delivered to bearer, to a specified
person or to his order. The intention to make it a negotiable
warehouse receipt appears, nevertheless, quite clearly
from the document itself: De Poli deposited the goods in
his own warehouse; the warehouse receipt states that he
is the owner of the goods deposited; there is no statement
that the goods are to be delivered to the bearer of the
receipt or to a specified person and the presumption must
therefore necessarily be that the goods are in the
warehouse subject to the orders of their owner De Poli. As
the owner of the goods he had, of course, full control over
them while the title remained in him; we certainly cannot
assume that it was the intention to have the goods in the
warehouse subject to no one's orders. That the receipts
were intended to be negotiable is further shown by the fact
that they were not marked "nonnegotiable" and that they
were transferred by the endorsement of the original holder,
who was also the warehouseman. In his dual capacity of
warehouseman and the original holder of the receipt, De
Poli was the only party to the instrument at the time of its
execution and the interpretation he gave it at that time
must therefore be considered controlling as to its intent.

In these circumstances, it is hardly necessary to enter into

any discussion of the intended meaning of the phrase "por
orden" occurring in the receipts, but for the satisfaction of
counsel, we shall briefly state some of our reasons for the
interpretation placed upon that phrase in the Felisa Roman
case:

The rule is well-known that wherever possible writings

must be so construed as to give effect to their general
intent and so as to avoid absurdities. Applying this rule, it is
difficult to see how the phrase in question can be given any
other rational meaning than that suggested in the case
mentioned. It is true that the meaning would have been
more grammatically expressed by the word "a la orden";
the world "por preceding the word "orden" is generally
translated into the English language as "by" but "por" also
means "for" or "for the account of" (seeVelazquez
Dictionary) and it is often used in the latter sense. The
grammatical error of using it in connection with "orden" in
the present case is one which might reasonably be
expected from a person insufficiently acquainted with the
Spanish language.

If the receipt had been prepared in the English language

and had stated that the goods were deposited "for order" of
U. de Poli, the expression would not have been in
accordance with good usage, but nevertheless in the light
of the context and that circumstances would be quite
intelligible and no one would hesitate to regard "for order"
as the equivalent of "to the order." Why may not similar
latitude be allowed in the construction of a warehouse
receipt in the Spanish language?

If we were to give the phrase the meaning contended for

by counsel, it would reveal no rational purpose. To say that
a warehouseman deposited his own goods with himself by
his own order seems superfluous and means nothing. The
appellants' suggestion that the receipt was issued by
Ireneo Magpantay loses its force when it is considered that
Magpantay was De Poli's agent and that his words and
acts within the scope of his agency were, in legal effect,
those of De Poli himself. De Poli was the warehouseman
and not Magpantay.

Counsel for the appellants also assail the dictum in our

decision in the Felisa Roman case that section 7 of the
Warehouse Receipts Act "appears to give any warehouse
receipt not marked "nonnegotiable" or "not negotiable"
practically the same effect as a receipt which by its terms is
negotiable provided the holder of such unmarked receipt
acquired it for value supposing it to be negotiable." The
statement is, perhaps, too broad but it certainly applies in
the present case as against the appellants, all of whom are
ordinary unsecured creditors and none of them is in
position to urge any preferential rights.
As instruments of credit, warehouse receipts play a very
important role in modern commerce and the present day
tendency of the courts is towards a liberal construction of
the law in favor of a bona fide holder of such receipts.
Under the Uniform Warehouse Receipts Act, the Supreme
Court of New York in the case of Joseph vs. P. Viane, Inc.
( [1922], 194 N.Y. Supp., 235), held the following writing a
valid warehouse receipt:

"Original. Lot No. 9. New York, November 19, 1918. P.

Viane, Inc., Warehouse, 511 West 40th Street, New York
City. For account of Alpha Litho. Co., 261 9th Avenue.
Marks: Fox Film Co. 557 Bdles 835- R. 41 x 54-116. Car
Number: 561133. Paul Viane, Inc. E.A. Thompson. P.
Viane, Inc., Warehouse."

In the case of Manufacturers' Mercantile Co vs. Monarch

Refrigerating Co.
( [1915], 266 III., 584), the Supreme Court of Illinois said:

The provisions of Uniform Warehouse Receipts Act, sec. 2

(Hurd's Rev. St. 1913, c. 114, sec. 242), as to the contents
of the receipt, are for the benefit of the holder and of
purchasers from him, and failure to observe these
requirements does not render the receipt void in the hands
of the holder.

In the case of Hoffman vs. Schoyer ( [1892], 143 III., 598),

the court held that the failure to comply with Act III, April 25,
1871, which requires all warehouse receipts for property
stored in Class C to "distinctly state on their face the
brands or distinguishing marks upon such property," for
which no consequences, penal or otherwise, are imposed,
does not render such receipts void as against an assignee
for value.

The appellants argue that the receipts were transferred

merely as security for advances or debts and that such
transfer was of no effect without a chattel mortgage or a
contract of pledge under articles 1867 and 1863 of the Civil
Code. This question was decided adversely to the
appellants' contention in the case of Roman vs. Asia
Banking Corporation, supra. The Warehouse Receipts Act
is complete in itself and is not affected by previous
legislation in conflict with its provisions or incompatible with
its spirit or purpose. Section 58 provides that within the
meaning of the Act "to "purchase" includes to take as
mortgagee or pledgee" and "purchaser" includes
mortgagee and pledgee." It therefore seems clear that, as
to the legal title to the property covered by a warehouse
receipt, a pledgee is on the same footing as a vendee
except that the former is under the obligation of
surrendering his title upon the payment of the debt secured.
To hold otherwise would defeat one of the principal
purposes of the Act, i. e., to furnish a basis for commercial
credit.

The appellants also maintain that baled hemp cannot be

regarded as fungible goods and that the respective
warehouse receipts are only good for the identical bales of
hemp for which they were issued. This would be true if the
hemp were ungraded, but we can see no reason why bales
of the same government grade of hemp may not, in certain
circumstances, be regarded as fungible goods. Section 58
of the Warehouse Receipts Act defines fungible goods as
follows:

"Fungible goods" means goods of which any unit is, from

its nature or by mercantile custom, treated as the
equivalent of any other unit.

In the present case the warehouse receipts show how

many bales of each grade were deposited; the
Government grade of each bale was clearly and
permanently marked thereon and there can therefore be
no confusion of one grade with another; it is not disputed
that the bales within the same grade were of equal value
and were sold by the assignee for the same price and upon
the strength of the Government grading marks. Moreover,
it does not appear that any of the claimant creditors,
except the appellees, hold warehouse receipts for the
goods here in question. Under these circumstances, we do
not think that the court below erred in treating the bales
within each grade as fungible goods under the definition
given by the statute. It is true that sections 22 and 23
provide that the goods must be kept separated and that the
warehouseman may not commingle goods except when
authorized by agreement or custom, but these provisions
are clearly intended for the benefit of the warehouseman. It
would, indeed, be strange if the warehouseman could
escape his liability to the owners of the goods by the
simple process of commingling them without authorization.
In the present case the holders of the receipts have
impliedly ratified the acts of the warehouseman through
the pooling agreement hereinbefore quoted.

The questions so far considered are common to all of the

claims now before us, but each claim has also its separate
features which we shall now briefly discuss:

R.G. Nos. 21000 AND 21004

CLAIMS OF THE BANK OF THE PHILIPPINE ISLANDS

AND THE GUARANTY TRUST COMPANY OF NEW
YORK

The claim of the Bank of the Philippine Islands is

supported by four warehouse receipts, No. 147 for 393
bales of hemp, No. 148 for 241 bales of hemp, No. 149 for
116 bales of hemp and No. 150 for 217 bales of hemp.
Subsequent to the pooling agreement these warehouse
receipts were signed, endorsed and delivered to the
Guaranty Trust Company of New York, which company,
under a stipulation of October 18, 1921, was allowed to
intervene as a party claiming the goods covered by said
receipts, and which claim forms the subject matter of the
appeal R.G. No. 21004. All of the warehouse receipts
involved in these appeals were issued on November 13,
1920, and endorsed over the Bank of the Philippine
Islands.

On November 16, 1920, De Poli executed and delivered to

said bank a chattel mortgage on the same property
described in the receipts, in which chattel mortgage no
mention was made of the warehouse receipts. This
mortgage was registered in the Office of the Register of
Deeds of Manila on November 18, 1920.

The appellants argue that the obligations created by the

warehouse receipts were extinguished by the chattel
mortgage and that the validity of the claim must be
determined by the provisions of the Chattel Mortgage Law
and not by those of the Warehouse Receipts Act, or, in
other words, that the chattel mortgage constituted a
novation of the contract between the parties.

Novations are never presumed and must be clearly proven.

There is no evidence whatever in the record to show that a
novation was intended. The chattel mortgage was
evidently taken as additional security for the funds
advanced by the bank and the transaction was probably
brought about through a misconception of the relative
values of warehouse receipts and chattel mortgages. As
the warehouse receipts transferred the title to the goods to
the bank, the chattel mortgage was both unnecessary and
inefficatious and may be properly disregarded.

Under the seventh assignment of error the appellants

argue that as De Poli was declared insolvent by the Court
of First Instance of Manila on December 8, 1920, only
twenty-five days after the warehouse receipts were issued,
the latter constituted illegal preferences under section 70
of the Insolvency Act. In our opinion the evidence shows
clearly that the receipts were issued in due and ordinary
course of business for a valuable pecuniary consideration
in good faith and are not illegal preferences.

R.G. No. 21002

CLAIM OF THE HONGKONG & SHANGHAI BANKING

CORPORATION

The warehouse receipts held by this claimant-appellee are

numbered A-130 for 490 bales of hemp and 321 bales of
maguey, No. A-134 for 1,970 bales of hemp, No. A-135 for
1,173 bales of hemp and No. A-137 for 237 bales of hemp,
were issued by De Poli and were endorsed and delivered
to the bank on or about November 8, 1920. The appellants
maintain that the bank at the time of the delivery to it of the
warehouse receipts had reasonable cause to believe that
De Poli was insolvent, and that the receipts therefore
constituted illegal preferences under the Insolvency Law
and are null and void. There is nothing in the record to
support this contention.

The other assignments of error relate to questions which

we have already discussed and determined adversely to
the appellants.

R.G. No. 21003

CLAIM OF THE CHARTERED BANK OF INDIA,

AUSTRALIA & CHINA

This claimant holds warehouse receipts Nos. 131 for 3,808

bales of hemp, A-157 for 250 bales of hemp, A-132 for
1,878 bales of maguey and A-133 for 1,574 bales of
maguey. Nos. A-131, A-132 and A-133 bear the date of
November 6, 1920, and A-157 is dated November 19,
1920.
Under the fourth assignment of error, the appellants
contend that the court erred in permitting counsel for the
claimant bank to retract a withdrawal of its claim under
warehouse receipt No. A-157. It appears from the
evidence that during the examination of the witness Fairnie,
who was the local manager of the claimant bank, counsel
for the bank, after an answer made by Mr. Fairnie to one of
his questions, withdrew the claim under the warehouse
receipt mentioned, being under the impression that Mr.
Fairnie's answer indicated that the bank had knowledge of
De Poli's pending insolvency at the time the receipt was
delivered to the bank. Later on in the proceedings the court,
on motion of counsel, reinstated the claim. Counsel
explains that by reason of Mr. Fairnie's Scoth accent and
rapid style of delivery, he misunderstood his answer and
did not discover his mistake until he read the transcript of
the testimony.

The allowance of the reinstatement of the claim rested in

the sound discretion of the trial court and there is nothing in
the record to show that this discretion was abused in the
present instance.

Under the fifth assignment of error appellants argue that

the manager of the claimant bank was informed of De
Poli's difficulties on November 19, 1920, when he received
warehouse receipt No. A-157 and had reasonable cause to
believe that De Poli was insolvent and that the transaction
therefore constituted an illegal preference.

Mr. Fairnie, who was the manager of the claimant bank at

the time the receipt in the question was delivered to the
bank, testifies that he had no knowledge of the impending
insolvency and Mr. De Poli, testifying as a witness for the
assignee-appellee, stated that he furnished the bank no
information as to his failing financial condition at any time
prior to the filing of the petition for his insolvency, but that
on the contrary he advised the bank that his financial
condition was sound.

The testimony of the same witnesses also shows that the

bank advanced the sum of P20,000 to De Poli at Cebu
against the same hemp covered by warehouse receipt No.
A-157 as early as October, 1920, and that upon shipment
thereof to Manila the bill of lading, or shipping documents,
were made out in favor of the Chartered Bank and
forwarded to it at Manila; that upon the arrival of the hemp
at Manila, Mr. De Poli, by giving a trust receipt to the bank
for the bill of lading, obtained possession of the hemp with
the understanding that the warehouse receipt should be
issued to the bank therefor, and it was in compliance with
that agreement previously made that the receipt was
issued on November 19, 1920. Upon the facts stated we
cannot hold that the bank was given an illegal preference
by the endorsement to it of the warehouse receipt in
question. (Mitsui Bussan Kaisha vs. Hongkong & Shanghai
Banking Corporation, 36 Phil., 27.)

R.G. No. 21006

CLAIM OF THE ASIA BANKING CORPORATION

Claimant holds warehouse receipts Nos. A-153, dated

November 18, 1920, for 139 bales of tobacco, A-154,
dated November 18, 1920, for 211 bales of tobacco, A-155,
dated November 18, 1920, for 576 bales of tobacco, A-57,
dated May 22, 1920, for 360 bales of hemp, A-93, dated
July 8, 1920, for 382 bales of hemp, A-103, dated August
18, 1920, for 544 bales of hemp, A-112, dated September
15, 1920, for 250 bales of hemp and A-111, dated
September 15, 1920, for 207 bales of maguey.

The assignments of error in connection with this appeal are,

with the exception of the fourth, similar to those in the other
cases and need not be further discussed.
Under the fourth assignment, the appellants contend that
warehouse receipts Nos. A-153, A-154 and A-155 were
illegal preferences on the assumption that the claimant
bank must have had reasonable reasons to believe that De
Poli was insolvent on November 18, 1920, when the three
receipts in question were received. In our opinion, the
practically undisputed evidence of the claimant bank
sufficiently refutes this contention.

For the reasons hereinbefore stated the judgments

appealed from are hereby affirmed, without costs. So
ordered.

Street, Malcolm, Avancea, Villamor, and Romualdez, JJ.,

concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-16510 January 9, 1922

PHILIPPINE NATIONAL BANK, plaintiff-appellant,

vs.
PRODUCERS' WAREHOUSE
ASSOCIATION, defendant-appellee.

Roman Lacson for appellant.

Ross & Lawrence and Ewald E. Selph for appellee.

JOHNS, J.:
The plaintiff is a corporation organized under the banking
laws of the Philippine Islands with its principal office in the
city of Manila. The defendant is a domestic corporation
doing a general warehouse business and domiciled at
Manila, and the Philippine Fiber and Produce Company, to
which we will hereafter refer as the Produce Company, is
another domestic corporation with its principal office also
at Manila. In May, 1916, the defendant, as party of the first
part, entered into a written contract with the Produce
Company, as party of the second part, in and by which "the
above-named party of the second part is hereby named,
constituted, and appointed as the general manager of the
business of the party of the first part, in all of the branches
thereof, with the duties, powers, authority and
compensation hereinafter provided." "The said party of the
second part shall exercise a general and complete
supervision over and management of the business of the
party of the first part," and "shall direct, manage, promote
and advance the said business, subject only to the control
and instructions of the board of directors of the party of the
first part." That said party of the second part, as general
manager, shall have all powers and authorities necessary,
proper or usual for the due transaction of the business of
the party of the first part, including the power to sign the
company's name, save and except such power or authority
as shall have been expressly reserved to itself, by the
board of directors of the party of the first part, provided
"that such reservations by the board of directors shall not
be employed to unreasonably hamper or interfere with the
due management of said business and shall, at no time,
reduce the powers and authorities of said general manager
below the usual and ordinary standard in business of like
kind." It is then agreed that the Produce Company shall
have an annual salary of P7,500 for its services as general
manager, and that the defendant will also pay the local
agents of the Produce Company P300 per month for their
services. The agreement also provides that it shall remain
in force and effect ten years from date, with the right of the
Produce Company to renew it for a further period of one to
ten years at its option. In the months of November and
December, 1918, and while the contract was in force and
effect, the defendant duly issued to the Produce Company
its negotiable quedans Nos. 1255, 1266, 1273, 1275, 1277,
1279, and 1283 for 15,699.34 piculs of copra in and by
which, subject to the terms and conditions therein stated, it
agreed to deliver that amount of copra to the Produce
Company or its order.

Section 4 of the conditions printed on the back provides:

This Association will deliver the package, noted hereon, on

surrender to the Association of this warrant endorsed by
the party who shall be for the time registered in the books
of the Association as the owner of the packages described
hereon; and the production by the Association of this
warrant shall at all times be conclusive proof that the
packages hereon noted have been properly delivered by
the Association and shall exempt the Association from all
responsibility in connection with the said packages or
goods.

Section 5 provides:

No transfer of interest and/or ownership will be recognized

by the Association unless registered in the books of the
Association, and/or all charges for storage and/or
insurance due to the Association paid. Such storage
and/or insurance shall constitute a lien against the
packages herein noted until paid and aid package shall
remain undelivered until such lien or lien is/are satisfied.

Each quedan gave the number of sack, piculs, warehouse

number, gross weight in kilos and its declared value, and
recited thereon that the copra was insured for the full
amount of its declared value, and across the face of the
quedan were the words "Negotiable Warrant" in red ink.
They were all of the printed form entitled "Producers'
Warehouse Association." Each recited in red ink "This
warrant is of no value unless signed by an officer of the
Association," and were signed "Producers' Warehouse
Association by George B. Wicks, Treasurer, and
Producers' Warehouse Association by R. Torres,
Warehouseman." Each receipt was also numbered, and
stated the number of the warehouse and where situated,
and recited that storage charges were at the rate of P0.04
per picul per month, and that the insurance rate was 1/3
per cent per month on the declared value.

The Produce Company arranged for an overdraft with the

plaintiff of P1,000,000. To secure such overdraft, and as
collateral from and after the dates of their issuance, the
quedans in question were endorsed in blank by the
Produce Company, and delivered to the plaintiff, which
became and is now the owner and holder thereof. Without
making a tender of any charges, on March 21, 1919, the
plaintiff requested the delivery of the copra described in the
respective quedans, and, for its failure to do so,
commenced this action on April 23, 1919, to recover its
value alleged to be P240,689, with interest from March 21,
1919, at the rate of 6 per cent per annum. July 10, 1919,
an amended complaint was filed, and on August 9, 1919, a
second amended complaint was filed, in which it is alleged
that, in good faith, the plaintiff purchased these quedans,
and that it is the owner, and recites all of the conditions
printed on the back, and made a part of the quedans. It is
then alleged that on July 30, 1919, the plaintiff requested
the defendant to register the quedans in the name of the
plaintiff, and to deliver to it the 14,587.19 piculs of copra,
and, upon that date, that it had offered to satisfy any lien
that defendant might have, to surrender the receipts with
such indorsement that it might require, and the receipt
therefor, when the goods were delivered, if such signature
is requested by the defendant. "That the defendant refused
to comply with the demands of the plaintiff, stating that it
could not deliver the goods mentioned in the receipts as
said goods are not in the warehouse, said defendant still
refusing to make such delivery." That on July 30, 1919,
copra was of the value of P21 per picul. That by reason of
such refusal, plaintiff has been damaged in the amount of
P306,330.99. It is also alleged that in January, 1919, with
the consent of the plaintiff, the Produce Company removed
from the warehouse of the defendant 1,112.15 piculs of
copra described in receipt No. 1255, of the declared value
of P18,350.

For amended answer, the defendant admits that the

Produce Company deposited copra in defendant's
warehouse, and that warehouse receipts were issued
therefor to the Produce Company, "signed by one George
B. Wicks and one R. Torres, but denies that either of the
said George B. Wicks or the said R. Torres had any
authority to issue such receipts in the name of the
defendant," or that the receipts set out in plaintiff's
complaint are complete and correct copies of those issued,
and, as a further answer and defense, pleads that at the
time alleged, the Produce Company was the manager of
the defendant's warehouse; that all the copra deposited by
the Produce Company "in the defendant's warehouse" was,
by and with the consent and knowledge of plaintiff, sold
and delivered to the Laguna Cocoanut Oil Company, and
all the proceeds thereof deposited to the account of the
said Philippine Fiber and Produce Company with plaintiff,
before the filing of the said second amended complaint;
that by and with the consent of plaintiff, said delivery was
made by the Philippine Fiber and Produce Company, the
manager of the defendant's warehouse, without the
surrender of the receipts referred to in the complaint; that
said receipts were issued without defendant's authority, as
hereinbefore set out; that said receipts were never
transferred to plaintiff on the books of defendant, as
provided in the terms thereof; and that they were issued
without the copra described therein being deposited in the
defendant's warehouse. Testimony was taken on such
issues during which the plaintiff offered in evidence the
described quedans as Exhibits C to I, inclusive, and the
defendant admitted that the signature appearing on the
lower left-hand corner of each exhibit is the signature of
George B. Wicks, and that at the time he signed the
quedans "he was the duly elected, qualified and appointed
treasurer of defendant," that the signature on the lower
right-hand corner of each quedan was signed by R. Torres;
and that he was a warehouseman of the defendant at the
time, and in the employ of the Produce Company. After the
taking of testimony, the lower court rendered judgment for
the defendant, from which the plaintiff appeals, claiming in
substance that the court erred in not giving plaintiff
judgment for the full amount prayed for in its complaint.

On March 21, 1919, the plaintiff notified the defendant that

the Produce Company had endorsed to plaintiff the above
described quedans, and asked that it should be informed
"as to when we can take possession of the goods
represented by the above quedans." This was answered
by a letter from the secretary and attorney for the
defendant, known in the record as Exhibit B, and which the
trial court refused to receive in evidence. But it does
appear from the record that in response to that letter, the
then secretary and attorney for the defendant went to the
bank, and that the only matter which was then and there
discussed between the parties was the amount which the
defendant should pay the plaintiff for the copra that it could
not deliver. That nothing was ever said about the lien or the
surrender of the quedans, or that the receipts should be
signed for the copra when delivered. It also appears that
on the 30th of July, after the court sustained the demurrer
to the complaint, the attorney for the bank went direct to
the defendant and then offered to pay any lien or charges
that it might have on the quedans, and offered it all the
quedans indorsed in blank by the Produce Company, and
"to place on them any indorsement that would make them
negotiable," and to sign for the bank the receipts for the
copra when delivered. That Mr. Wicks, who was then
acting for the defendant, refused to take up the quedans,
stating that the copra which they represented was not in
the warehouse, and that "we cannot give you the copra
because it is not there." The bank's attorney then had the
quedans with him and exhibited them to Mr. Wicks. It
further appears that on July 29, 1919, and in answer to its
letter of the 28th, the Produce Company wrote the
defendant as follows:

We regret to state that we are unable to return to you the

warrant referred to in your letter for the reason that, in
December, 1918, we deposited these warrants with the
Philippine National Bank as security for loans and said
bank refuses to return same to us. As all the copra, less
shrinkage and other losses, has been delivered by you, we
hereby authorize you to cancel such warrants and hereby
agree to hold you free and harmless for so doing.

The attorney further testified: "I have seen the overdraft

agreement and, if I remember right, it was for a million
pesos." The Produce Company "signed one of the printed
forms of the bank for overdraft agreement." When plaintiff
rested, the defendant moved for judgment against the
plaintiff for want of sufficient evidence. The motion was
denied and exception duly taken. The defendant then
called J. Mclaughlin, who, as a public accountant, audited
the books of the Produce Company for the period of six
months ending December 31, 1918. A copy of his report
made from the books of the Produce Company was offered
in evidence, from which it appears that on December 31,
1918, it owed the plaintiff P887,856.66. George E.
Kauffman testified that he was president of both the
defendant and the Produce Company and held that
position in October, 1916, at the time the contract was
made between the two companies. That it was voluntarily
surrendered and cancelled in April, 1919, also that the
contract was duly ratified by the director of both
corporations, and after its ratification, the Produce
Company assumed the active management of defendant's
business, under the terms and provisions of the contract.
He also testified that Mr. Lacson presented quedans for a
certain amount of copra to Mr. Wicks, and asked for the
delivery of the copra. Mr. Wicks told Mr. Lacson "the copra
did not exist because the copra has been delivered by
the Philippine Fiber and Produce Company." Mr. Kauffman
further testified that he owned 98 per cent of the capital
stock of the Produce Company, and that Mr. Wicks had
only one share.

Q. What was the balance show by your books? A. I

reserve the right, in answering these questions,
because I am not prepared to answer in amounts. They
run into large amounts of money.

A. I can say what caused the controversy, and that is that

the bank showed an overdraft of some five hundred and
some odd thousand pesos as to the Philippine Fiber and
Produce Company, while my books show an overdraft of
some hundred and thirty-nine thousand pesos, caused
by the fact that I have charged the Philippine National
Bank with the entire expenditure for the purchase of hemp
made for their account and risk during the year of 1918. I
have so notified the bank, but they haven't seen fit to reply
to my letter.

He further testified that Mr. Wicks was treasurer of the

defendant at the time the quedans were issued, and that
the printed forms used are like those held by the bank.

Q. And they have been from the very beginning, haven't

they? A. Yes, sir.

Mr. Wicks testified that he was vice-president of the

Produce Company from October, 1916, until February,
1919, and that he was treasurer of the company "from July
1, 1917, up until this year." He further testified that R.
Torres was actually in charge of the warehouse itself, and
that the Produce Company was managing the warehouse.
That it was selling copra between December 1, 1918, and
February 1, 1919, and that the proceeds were deposited in
the Philippine National Bank; that during that period the
warehouse receipts were hypothecated with the plaintiff;
that under the practice at the end of each week, the
warehouse would notify him of the amount of copra
delivered; and that "I would then withdraw from the
Philippine National Bank the corresponding number of
warrant for cancellation. Sometimes I would go personally
and withdraw them; and at other times I would send the
cashier down with a note to the Philippine National Bank,
asking them to release these warrants for cancellation."
The warehouse receipts were delivered to me regularly
"until about the end of January or early in February." This
procedure was a matter of convenience to both parties.

Q. What reason did you give to Philippine National Bank

for not delivering the copra to Mr. Lacson, or any other
representative of the bank? A. The reason was that the
copra was not in the warehouse; having been delivered to
its owners.

Q. While you were treasurer of the Producers' Warehouse

Association, all the quedans issued by the warehouse
were signed by you as treasurer, were they not? A. Yes,
sir.

Q. Even by Mr. Kauffman now haven't they? A. So far

as I know, they have.

The record shows that Mr. Kauffman was absent from

about March 15, 1918, until May, 1919.

Q. And during that period you had full authority to act for
the Philippine Fiber and Produce Company? A. Yes.
Q. Was that authority ever questioned by anyone; by Mr.
Kauffman or anyone? A. Not to my knowledge.

The testimony is conclusive that the quedans in question

were duly executed by Wicks, as treasurer, and Torres, as
warehouseman, for and on behalf of the defendant, and as
its act and deed. That it appears from its own books that on
December 31, 1918, the Produce Company was indebted
to the plaintiff in the sum of P887,856.66, and Mr.
Kauffman, president of the defendant, testified that the
Produce Company had an indebtedness; "they run into
large amounts of money." The testimony is also conclusive
that amounts money." The testimony is also conclusive
that after the quedans described in the complaint were
issued to the Produce Company, they were endorsed in
blank, and physical possession delivered to the plaintiff as
collateral security for the overdraft of the Produce
Company, and that each of them is in form negotiable.

That on March 21, 1919, plaintiff notified the defendant of

such facts and requested the delivered of the copra. At that
time no claim was made on account of conditions, liens or
charges, and the plaintiff did not offer to pay the charges or
comply with the conditions, and the only question
discussed was the amount of copra to which plaintiff was
entitled. In July, 1919, and after the sustaining of the
defendant's demurrer to the complaint, plaintiff, for the first
time, made a formal tender of all such conditions, and then
filed its second amended complaint in which tenders were
alleged. In its answer, the defendant denies that Wicks and
Torres had any authority to issue the quedans for, or in the
name of, the defendant, and, as further and separate
defense, alleges that the Produce Company was the
manager of the defendant's warehouse, and that all copra
deposited in it by the Produce Company was, with the
knowledge and consent of plaintiff, sold to the Laguna
Cocoanut Oil Company, and the proceeds of the sale were
duly deposited with the plaintiff to the account of the
Produce Company, before the filing of the second
amended complaint; that with the consent of the plaintiff,
delivery was made by the Produce Company, as manager
of the defendant's warehouse, without the surrender of the
quedans described in the complaint; that such receipts
were issued without authority and they were never
transferred to the plaintiff on the books of the defendant
corporation; and that they "were issued without the copra
described therein being deposited in defendant's
warehouse." The defendant, having alleged that the
quedans were invalid and wrongfully issued, and that the
copra therein described was not in defendant's warehouse,
is now estopped do claim or assert that the plaintiff did not
comply with any conditions precedent. In this kind of an
action, a person has no legal right to deny the existence of
the instruments on which it is based, and then claim that
plaintiff has not complied with the provisions of the
instruments. This question is squarely decided in
Wyatt vs. Henderson (31 Ore., 48; 48 Pac., 790), where
the court says:

. . . The only possible object defendants could have had in

seeking to show that storage was due on this grain was to
insist upon the maintenance of a statutory lien thereon,
under which they expected to hold the oats until their
charges had been paid, and thus defeat the action for the
recovery of possession; but, by denying the plaintiff's
ownership, the lien given by statute was waived, and the
title to and the quantity of the grain being the only issues
for trial, the amount due for storage was immaterial. . . .

This case was again followed and approved in

Anderson vs. Portland Flouring-Mills Co. (60 Pac., 839).
The same rule is also laid down in Cyc., vol. 38, p. 135,
where it is said:

. . . Similarly a tender is waived where the tenderee makes

any declaration which amounts to a repudiation of the
contract, or takes any position which would render a tender,
so long as the position taken by him is maintained, a vain
and idle ceremony. . . .

Ruling Case Law, vol. 26. p. 624, says:

Since the law does not require any one to do vain or

useless things, a formal tender is never required where it
appears that if it had been made, the money would not
have been received, as where a creditor states that an
actual tender will be useless because he will not accept it,
or where one party to a contract states that he will not
comply with its terms.

. . . Where a contract calls for the performance by the

parties of concomitant acts, neither party being obliged to
perform unless the other is ready to perform the correlative
act, a tender is not necessary by the one if the other is not
willing to perform his part. . . . (Citing numerous
authorities.)

Again, in the inception of this dispute nothing was ever

said about any condition precedent, or about any claim on
account of liens or charges, and it is very apparent that at
that time the defendant did not contemplate any such a
defense. When the point was first raised, the formal tender
or offer was promptly made, and the defendant then, for
the first time, denied the authenticity of the quedans, and
claimed that they were wrongfully and illegally issued. If
the copra evidence by the quedans was in the bodegas,
defendant's contention would be tenable, but upon the
facts shown, the defendant has no legal right to make that
defense.

Complaint is made that the quedans were not transferred

on the books of the company in accord with their
provisions. Here again, it is shown that the plaintiff
produced them and requested their transfer to the bank,
which the defendant requested their transfer to the bank,
which the defendant refused to make. It is not now in a
position to urge that point as a defense.

The stubborn fact remains that, under the written contract

between them, the Produce Company was the general
manager of the defendant's warehouse business, and that
it had authority to issue quedans in its name, and as its
corporate act and deed. That the quedans in question are
duly authenticated, and were duly issued by the defendant
to, and in the name of, the Produce Company, and when
issued were duly endorsed, and delivered to the plaintiff for
value. For aught that appears in the record, the bank was
acting in good faith, and the quedans were duly issued,
endorsed and delivered to it as collateral in the ordinary
course of business. Although there may have been fraud,
there is no allegation or proof that the bank was a party to it,
or had any knowledge of it, and this court has no right to
assume that the bank was a party to a fraud. Giving to the
quedans their legal force and effect, it must follow that at
the time the demand was made, the bank was the owner
and entitled to the possession of the copra therein
described. The receipts call for 15,699.34 piculs of copra,
but plaintiff admits that, with its consent, 1,112.15 piculs of
copra, of the declared value of P18,350, were delivered to
the Produce Company from and out of receipt No. 1255.
This would leave 14,587.19 piculs of copra evidenced by
the quedans.

As in the case of the Philippine Trust Company vs.

Philippine National Bank,1 recently decided, there is no
direct evidence of the market value of the copra. But each
quedan specified the amount of its declared value. That
being specified in the quedans, in the absence of other
proof, and upon the fact shown, the declared value will be
deemed and treated as the market value. Deducting the
1,112.15 piculs, which were surrendered by the plaintiff out
of quedan No. 1255, the declared value of the copra
remaining was P240,689.
The decision of the lower court is reversed, and judgment
will be entered here in favor of the plaintiff and against the
defendant for P240,689, with interest thereon from March
21, 1919, at the rate of 6 per cent per annum, and costs in
this and the lower court. So ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avancea,

Villamor and Romualdez, JJ., concur.

Footnotes

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-23033 January 5, 1967

LUA KIAN, plaintiff and appellee,

vs.
MANILA RAILROAD COMPANY and MANILA PORT
SERVICE, defendants and appellants.

D. F. Macaranas and S. V. Pampolina Jr. for defendants

and appellants.
San Juan, Laig and Associates for plaintiff and appellee.

BENGZON, J. P., J.:

The present suit was filed by Lua Kian against the Manila
Railroad Co. and Manila Port Service for the recovery of
the invoice value of imported evaporated "Carnation" milk
alleged to have been undelivered. The following stipulation
of facts was made:

1. They admit each other's legal personality, and that

during the time material to this action, defendant Manila
Port Service as a subsidiary of defendant Manila Railroad
Company operated the arrastre service at the Port of
Manila under and pursuant to the Management Contract
entered into by and between the Bureau of Customs and
defendant Manila Port Service on February 29, 1956;

2. On December 31, 1959, plaintiff Lua Kian imported

2,000 cases of Carnation Milk from the Carnation
Company of San Francisco, California, and shipped on
Board SS "GOLDEN BEAR" per Bill of Lading No. 17;

3. Out of the aforesaid shipment of 2,000 cases of

Carnation Milk per Bill of Lading No. 17, only 1,829 cases
marked `LUA KIAN 1458' were discharged from the vessel
SS `GOLDEN BEAR' and received by defendant Manila
Port Service per pertinent tally sheets issued by the said
carrying vessel, on January 24, 1960;

4. Discharged from the same vessel on the same date unto

the custody of defendant Manila Port Service were 3,171
cases of Carnation Milk marked "CEBU UNITED
4860-PH-MANILA" consigned to Cebu United Enterprises,
per Bill of Lading No. 18, and on this shipment, Cebu
United Enterprises has a pending claim for short-delivery
against defendant Manila Port Service;

5. Defendant Manila Port Service delivered to the plaintiff

thru its broker, Ildefonso Tionloc, Inc. 1,913 cases of
Carnation Milk marked "LUA KIAN 1458" per pertinent gate
passes and broker's delivery receipts;
6. A provisional claim was filed by the consignee's broker
for and in behalf of the plaintiff on January 19, 1960, with
defendant Manila Port Service;

7. The invoice value of the 87 cases of Carnation Milk

claimed by the plaintiff to have been short-delivered by
defendant Manila Port Service is P1,183.11 while the
invoice value of the 87 cases of Carnation Milk claimed by
the defendant Manila Port Service to have been
over-delivered by it to plaintiff is P1,130.65;

8. The 1,913 cases of Carnation mentioned in paragraph 5

hereof were taken by the broker at Pier 13, Shed 3,
sometime in February, 1960, where at the time, there were
stored therein, aside from the shipment involved herein,
1000 cases of Carnation Milk bearing the same marks and
also consigned to plaintiff Lua Kian but had been
discharged from SS `STEEL ADVOCATE' and covered by
Bill of Lading No. 11;

9. Of the shipment of 1000 cases of Carnation Milk which

also came from the Carnation Company, San Francisco,
California, U.S.A. and bearing the same marks as the
shipment herein but had been discharged from S/S
"STEEL ADVOCATE" and covered by Bill of Lading No. 11,
Lua Kian as consignee thereof filed a claim for
short-delivery against defendant Manila Port Service, and
said defendant Manila Port Service paid Lua Kian plaintiff
herein, P750.00 in settlement of its claim;

10. They reserve the right to submit documentary

evidence;

11. They submit the matter of attorney's fees and costs to

the sound discretion of the Court.

On these facts and documentary evidence subsequently

presented, the Court of First Instance of Manila ruled that
1,829 cases marked Lua Kian (171 cases less than the
2,000 cases indicated in the bill of lading and 3,171 cases
marked "Cebu United" (171 cases overthe 3,000 cases in
the bill of lading were discharged to the Manila Port
Service. Considering that Lua Kian and Cebu United
Enterprises were the only consignees of the shipment of
5,000 cases of "Carnation" milk, it found that of the 3,171
cases marked "Cebu United", 171 should have been
delivered to Lua Kian. Inasmuch as the defendant Manila
Port Service actually delivered 1,913 cases to
plaintiff,1 which is only 87 cases short of 2,000 cases as
per bill of lading the former was ordered to pay Lua Kian
the sum of P1,183.11 representing such shortage of 87
cases, with legal interest from the date of the suit, plus
P500 as attorney's fees.

Defendants appealed to Us and contend that they should

not be made to answer for the undelivered cases of milk,
insisting that Manila Port Service was bound to deliver only
1,829 cases to Lua Kian and that it had there before in fact
over-delivered to the latter.

The bill of lading in favor of Cebu United Enterprises

indicated that only 3,000 cases were due to said consignee,
although 3,171 cases were marked in its favor. Accordingly,
the excess 171 cases marked "Cebu United" placed the
defendant arrastre operator in a dilemma, for should it
deliver them to Lua Kian the goods could be claimed by the
consignee Cebu United Enterprises whose markings they
bore, and should it deliver according to markings, to Cebu
United Enterprises, it might be sued by the consignee, Lua
Kian whose bill of lading indicated that it should receive
171 cases more. The dilemma itself, however, offered the
solution. The legal relationship between an arrastre
operator and the consignee is akin to that of a depositor
and warehouseman.2 As custodian of the goods
discharged from the vessel, it was defendant arrastre
operator's duty, like that of any ordinary depositary, to take
good care of the goods and to turn them over to the party
entitled to their possession.3 Under this particular set of
circumstances, said defendant should have withheld
delivery because of the discrepancy between the bill of
lading and the markings and conducted its own
investigation, not unlike that under Section 18 of the
Warehouse Receipts Law, or called upon the parties, to
interplead, such as in a case under Section 17 of the same
law, in order to determine the rightful owner of the goods.

It is true that Section 12 of the Management Contract

exempts the arrastre operator from responsibility for
misdelivery or non-delivery due to improper or insufficient
marking. We cannot however excuse the aforestated
defendant from liability in this case before Us now because
the bill of lading showed that only 3,000 cases were
consigned to Cebu United Enterprises. The fact that the
excess of 171 cases were marked for Cebu United
Enterprises and that the consignment to Lua Kian was 171
cases less than the 2,000 in the bill of lading, should have
been sufficient reason for the defendant Manila Port
Service to withhold the goods pending determination of
their rightful ownership.

We therefore find the defendants liable, without prejudice

to their taking whatever proper legal steps they may
consider worthwhile to recover the excess delivered to
Cebu United Enterprises.

With respect to the attorney's fees awarded below, this

Court notices that the same is about 50 per cent of the
litigated amount of P1,183.11. We therefore deem it
reasonable to decrease the attorney's fees to P300.00.

Wherefore, with the aforesaid reservation, and with the

modification that the attorney's fee is reduced to P300.00,
the judgment appealed from is affirmed, with costs against
appellants. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal,
Zaldivar, Sanchez and Castro, JJ., concur.

Footnotes